Published on: 2017-08-09

Work and live under threat

Work and live under threat

A new Bill, The Residential Tenancies Amendment Bill (No 2) which is currently before parliamentary select committee, will affect commercial property owners if the commercial property is used as a residence.

The Bill is aimed at three areas of change although only one we anticipate will have an effect on commercial property owners.

The first area of change allows for landlords to better manage methamphetamine contamination by providing easier access for the testing of meth and the ability to terminate a tenancy if the contamination is at unsafe levels.

The second area of change opens the way for tenants to be held liable for the cost of their landlord's insurance excess for damage caused by carelessness. The bill limits the liability to four weeks rent and a tenant will remain fully liable where the damage is deliberate. The change was required after the Osaki Court of Appeal decision last year, which meant landlords could not recover the costs

The last area of change the Bill addresses is the one we believe will affect commercial property owners. It strengthens the law for prosecuting landlords who tenant unsuitable properties, ones that are not lawful for residential use. Defined as "Unlawful residential premises include dwellings within a property which were constructed for another purpose, such as a garage or a commercial building, or properties which do not comply with relevant building health and safety legislation." A rental property could also be unlawful if the particular occupation of the premises breaches a condition of a resource consent or the relevant district plan.

Examples of commercial properties which could be deemed unsuitable include:

  • premises on a mezzanine floor in commercial premises;
  • premises that were originally built for commercial/industrial purposes;
  • a shipping container that had been converted into residential premises; and

Under the Bill once the Tribunal has determined a rental premise to be an unlawful residential premise it can order a full or partial rent repayment in favour of the tenant. The tenancy tribunal can also force a landlord to comply with relevant enactments so that the premises are made lawful or order exemplary damages for committing an unlawful act for failing to comply.

Owners and prospective purchasers need to ensure the property has the necessary resource consents and or building consents when there is any component of residential occupancy such as with 'Live and work’ buildings. Without such consents, the ‘She’ll be right’ attitude exposes owners to undue risk. 

Our recommendation is, where there are questions, you need to take advice.